China's inflation fails to perk up amid sluggish demand

FILE PHOTO: A customer shops at a supermarket in Handan, Hebei province, China March 9, 2019. REUTERS/Stringer

BEIJING (Reuters) – China’s factory-gate prices declined at a sharper-than-expected pace in October and consumer inflation eased to its slowest since 2009, highlighting continued economic challenges as COVID-19 saps demand.

The producer price index (PPI) fell 2.1% from a year earlier, the National Bureau of Statistics said in a statement, compared with a 2.1% drop in September and a 2.0% decline tipped by the median forecast from a Reuters survey of analysts.

On a monthly basis, producer inflation slowed to zero, compared with a 0.1% increase the previous month.

The weak inflation data contrasts with faster-than-expected growth in exports and manufacturing activity, which were seen as signs of a sustained recovery in China’s industrial sector.

China’s gross domestic product growth accelerated to 4.9% form a year earlier during the third quarter. Analysts expect China’s economy to post a small gain for all of 2020 and then expand at a more robust pace in 2021, partly on hopes that COVID-19 vaccines will become widely available globally.

The bureau said in a separate statement that the consumer price index rose 0.5% from a year earlier, the slowest since October 2009, and compared with a 0.8% rise tipped by the Reuters poll and a 1.7% rise in September.

Pork prices fell 2.8% year-on-year in October, marking the first decline after 19 months of sharp increases due to supply constraints.

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